Despite $69M Deal, E-Book Pricing Policies Still Unwritten

It's not clear how a settlement on the part of three publishers over e-book price-fixing charges will change things for consumers, beyond the small-change reimbursements provided for in the deal. Will digital book prices suddenly plummet? Not likely, said Billy Pidgeon, principal analyst at M2 Research. "This is
still going to be Byzantine in how it is worked out."

Hachette Book Group, HarperCollins Publishers
and Simon & Schuster have agreed to pay a total of more than US$69
million to consumers to resolve antitrust claims of alleged unlawful
conspiracy to fix the prices of electronic books. The three companies
further agreed to change the way their e-books will be priced.

The three publishers settled with 55 attorneys general in nearly every U.S. state
and the District of Columbia, as well as several territories.

"While publishers are entitled to their profits, consumers are equally
entitled to a fair and open marketplace," said Connecticut Attorney
General George Jepsen on Thursday. "This settlement will provide restitution to
those customers who were harmed by this price-fixing scheme, but it
also will restore competition in the e-book market for consumers'
long-term benefit."

This is the latest turn in a lawsuit that stemmed from a two-year investigation conducted in part by the U.S.
Department of Justice's Antitrust Division. This settlement does
appear to close the case with the three aforementioned publishers.

"We believe this is a fair settlement," said Adam Rothberg, a spokesperson for Simon &
Schuster. "We're pleased to now have put this matter
behind us, and moving forward, to continuing our work with authors
and accounts to grow the market for books of all formats -- and to take
advantage of the many opportunities afforded us by publishing in the
digital era."

And Then There Were 3

However, three other parties include publishers Penguin and MacMillan,
as well as Apple, and a case remains pending in the Southern
District of New York. The question now is what happens next.

"A couple of things are at work here. First and foremost is the
argument about whether Apple and the six publishers fixed the pricing
of e-books in order to challenge Amazon but which, in fact, were
essentially anticompetitive," said Charles King, principal analyst at
Pund-IT.

"The three who settled apparently decided that the payout --
$69 million spread across 50 states -- was less onerous than pursuing a legal
case that could result in higher legal costs and penalties, as well as
monopoly sanctions," he told the E-Commerce Times.

"Those are the literal risks facing Apple and the three remaining
publishers being investigated by the DoJ, but they could also suffer
the public humiliation and professional impact of being legally
branded as monopolists," King added.

Yet it is very unclear what the public might make of this.

"Apple is so beloved by so many people that the company may be able to
ride out even a conviction by repeating their novel claim that they
were simply trying to halt the loss-leader book pricing by Amazon that
Apple claims is corroding the e-book market," King explained.

"But I doubt that the publishers that are sticking with the
suit will fare as well," he continued. "To date, the success of online commerce has
mainly proved that American consumers love their bargains, so it seems
unlikely that they will harbor much sympathy for those colluding to
keep the prices of goods artificially high."

Price of E-Books

The other part of the equation is what the settlement even means. How will
e-book pricing policies change? This is still an unknown, especially with the New York
case is still pending.

"The devil is in the details," said Billy Pidgeon, principal analyst
at M2 Research. "There are a lot of issues with the pricing of digital
media. There are expectations that digital should be priced more
cheaply as there are no manufacturers. But this really hasn't been the
case."

Given that the three publishers have settled, it could be expected that
pricing will sort itself out. But consumers shouldn't expect to
suddenly see prices fall for that next hot bestseller.

"The market will work itself out there," Pidgeon told the
E-Commerce Times. "As far as competition, there really needs to be
fixed pricing on these items -- but let's face it, there is price
collusion in every industry."

What could happen is that Amazon will be charged the same for e-books
as smaller retailers, but Amazon could still offer better pricing to customers. If that's the case, has much really changed?

"Amazon can still compete with margins, but publishers can't or
shouldn't give Amazon a better deal," emphasized Pidgeon. "This is
still going to be Byzantine in how it is worked out."